The Obama administration's ambitious plan to ensure that the Internet remains "open" and "unfettered" was thrown into chaos Tuesday after a federal court ruled that the Federal Communications Commission lacked the authority to enforce its "network neutrality" rules.

The ruling, which represents a victory for cable giant Comcast (CMCSA) in a multi-year struggle with the FCC, amounts to a severe blow to the FCC as well as to advocates of net neutrality, or the idea that Internet providers should treat legal Web content equally and not discriminate against content produced by rivals or startups.

Anti-net neutrality advocates hailed the decision, while pro-net neutrality forces vowed to keep fighting. At present, there appear to be two main avenues to continue the campaign. One would be for Congress to pass legislation making net neutrality the law of the land. The other would be for the FCC to reclassify broadband service under traditional telephone service rules, which would give the agency the authority needed to enforce its principles of openness.

Either way, the FCC has suffered a serious blow and must now re-group.

FCC Faces 'Existential Crisis'

"The decision has forced the FCC into an existential crisis, leaving the agency unable to protect consumers in the broadband marketplace, and unable to implement the National Broadband Plan," S. Derek Turner, research director for Free Press, a pro-net neutrality group, said in a statement. "This cannot be an acceptable outcome for the American public and requires immediate FCC action to reestablish legal authority."

FCC spokesperson Jen Howard acknowledged the ruling is a setback for the agency's net neutrality principles. "Today's court decision invalidated the prior Commission's approach to preserving an open Internet," Howard said in a statement. "But the court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end."

"The FCC is firmly committed to promoting an open Internet and to policies that will bring the enormous benefits of broadband to all Americans," Howard added. "It will rest these policies -- all of which will be designed to foster innovation and investment while protecting and empowering consumers -- on a solid legal foundation."

Victory for Comcast, Anti-Net Neutrality Forces

The decision is a victory for Comcast, which had appealed a 2008 FCC ruling which found the cable giant had run afoul of the FCC's 2005 Internet Policy Statement, which listed four principles meant to "encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet."

Comcast has insisted that the FCC lacked the legal authority to enforce those principles. On Tuesday, a federal appeals court agreed. But Comcast's victory is largely symbolic because it had previously said it would voluntarily abide by open Internet rules. In essence, Comcast wanted to set a precedent, which it appears to have managed to do.

"We are gratified by the Court's decision today to vacate the previous FCC's order," Sena Fitzmaurice, Comcast's vice president of government communications, said in a statement. "Our primary goal was always to clear our name and reputation."

"Comcast remains committed to the FCC's existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet," Fitzmaurice added.

Meanwhile, anti-net neutrality advocates were cheering. "Obviously this attempt to dismantle and discourage current and future innovation has played itself out, as it should, in the courts, and has been soundly defeated," Bartlett Cleland, director of the Institute for Policy Innovation (IPI) Center for Technology Freedom, an anti-net neutrality organization, said in a statement.

Rep. Ed Markey: Congress Will Act

Not so fast, say pro-net neutrality forces, who are currently weighing two avenues to restore net neutrality authority to the FCC: action by Congress, or a FCC reclassification of broadband service.

Rep. Edward J. Markey, a Massachusetts Democrat and the co-author of net neutrality legislation in the House, issued a statement noting that "the court neither called into question the wisdom of network neutrality policies nor did it exonerate Comcast for its unreasonable interference with lawful consumer Internet use."

"We are now at a crucial crossroads," Markey declared. "Do we preserve the historic openness of the Internet, which has made it the most successful communications medium of all time, or do we enable Comcast and other communications colossi to erect fast lanes and slow lanes that stifle the ingenuity and investment that have characterized the Internet since its inception?"

Markey said he would "continue to work with my colleagues in Congress to provide the Commission any additional authority it may need to ensure the openness of the Internet for consumers, innovators and investors through passage of H.R. 3458, the Internet Freedom Preservation Act, which I introduced last July with my colleagues Anna Eshoo (D-Calif.) and Henry Waxman (D-Calif.)"

"Clearly, the Court's decision must not be the final word on this vitally important matter, and I intend to work vigorously to ensure an open Internet for generations to come," Markey added.

FCC May Move to Reclassify Broadband Service

Along with a legislative remedy, pro-net neutrality forces are also considering regulatory steps. Public Knowledge, a D.C.-based public interest group, issued a statement urging the FCC to re-classify broadband service under so-called "Title II" jurisdiction -- common carrier rules that govern phone service -- so that the agency could regain regulatory power over internet providers.

"The FCC should immediately start a proceeding bringing Internet access service back under some common carrier regulation similar to that used for decades," Gigi Sohn, co-founder of Public Knowledge said in a statement. "The Commission would not have to impose a heavy regulatory burden on the telephone and cable companies, yet consumers could once again have the benefit of legal protections and the Broadband Plan could go forward."

Cleland, of the IPI, blasted that notion. "While some want the FCC to control the Internet by placing it under Title II, thereby ending the open and free Internet by erecting government tariffs, rules, record keeping and reporting, this would amount to nothing more than seizing control of the Internet under the belief that Washington can do a better job crafting an Internet experience than the marketplace," he said.

Sohn, of Public Knowledge, countered: "We need to emphasize that no one is talking about regulating 'the Internet.' No one is talking about regulating search engines or websites. We are talking about re-applying policies to a telecommunications service that the FCC incorrectly abandoned."

Anti-net neutrality forces have clearly won a key battle. But given the FCC has very publicly come out in support for net neutrality, this war is far from over.